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The commercialization of hydraulic fracturing and horizontal drilling has revolutionized America's energy landscape. Just a decade ago, most people would have scoffed at the prospect of American energy independence by 2020. But with rapid growth in domestic oil and gas supplies, that hope has become more than just a pipe dream.

Thanks to increased production from shale reservoirs, natural gas production is the highest it's ever been. The resultant glut has driven prices down to decade lows, hurting profits at some of the nation's largest gas producers.

But low prices have been a boon to consumers, who use natural gas to heat and power their homes. It has also been hugely beneficial to another sector of the American economy - manufacturing. In fact, some argue that the shale boom may have the potential to revive U.S. manufacturing and make it globally competitive once again, ushering in a so-called "manufacturing renaissance." Are they right?

The economic impact of the shale boom The massive growth in domestic shale oil and gas production has had numerous benefits for the U.S. economy. One of the main ones has been a boost to employment. According to global research firm IHS, some 1.7 million jobs have already been created thanks to the shale boom. By 2020, the firm projects the number of jobs created may rise as high as 3 million.

Another big benefit of the energy boom has been an improvement in America's balance of payments. Increased domestic oil production in the past five years is set to reduce the U.S. oil import bill by around $75 billion this year, according to Daniel Yergin, an energy expert. Similarly, Yergin argues, the U.S. will realize savings of $100 billion per year related to LNG imports thanks to the rapid growth in domestic shale gas production.

Finally, the shale gas boom's benefits also extend to manufacturing - a sector of the American economy long thought to have been in secular decline. But over the past couple of years, low natural gas prices have incented domestic manufacturers to relocate some of their operations back to the U.S. The impact on companies that make petrochemicals and steel has been especially noteworthy.

Effect on steelmakers Nucor , a steel manufacturer with operations primarily in the U.S. and Canada, announced in 2010 its intentions to construct a $750 million plant in Louisiana. The direct reduced iron facility, currently under construction and expected to start up by mid-2013, will raise the steel producer's natural gas usage substantially.

The company also announced last month that it has entered into a long-term agreement with natural gas producer Encana for a natural gas drilling venture within the continental U.S. Nucor believes the agreement should provide a reliable and low-cost supply of natural gas for its existing and future needs for at least two decades.

The steelmaker said that direct reduced iron, manufactured at its Louisiana plant, would have the same price upon delivery as iron shipped from Trinidad, the country to which it had shipped a similar plant back in 2004. A company spokesperson, Katherine Miller, commented: "Affordable American shale gas has completely changed the economics for us."

Impact on chemical companies For American chemical companies, the sharp plunge in prices for natural gas liquids, or NGLs, has proved especially beneficial. Natural gas liquids, which fall within the umbrella of hydrocarbons - similar to natural gas and crude oil - include ethane, propane, butane, isobutene, and pentane. They have a wide array of uses that spans virtually every sector of the economy. One of their primary uses is as a raw input for chemical and petrochemical plants.

Ethane, which accounts for the biggest share of natural gas liquids field production, is widely used by American chemical firms to produce ethylene, a substance used to manufacture plastics and often used in pool liners, food packaging, and building insulation. In contrast, European chemicals producers use naphtha, a raw material derived from oil, for making similar products.

The huge price disparity between ethane and naphtha has amounted to a tremendous competitive advantage for domestic chemicals firms, which enjoy a nearly 50-to-1 cost advantage over their European counterparts. As a result of this and other favorable factors, U.S. chemical producers are planning to expand domestic ethylene capacity by over 25% from now until 2017.

Winners and losers The shale gas boom has resulted in numerous winners and losers. For instance, low natural gas liquids prices have eroded profitability at some U.S. energy companies. A wide array of oil and gas companies, including pipeline operators such as Williams Partners and Spectra Energy , refiner Marathon Oil , and oil and gas producers like Devon Energy and Apache all said low NGL prices contributed to lower quarterly profits this year.

Another loser has been the coal sector, which competes directly with natural gas as an energy source. Over the past year or so, coal stocks have taken a beating as utility companies have increasingly switched from coal-fired plants to gas-fired ones. Just look at the stock price histories of Alpha Natural Resources and Peabody Energy , which have been in general decline ever since early 2011.

Final thoughts and caveatsEven among U.S. manufacturers, the benefits of low natural gas prices are not evenly distributed. Hence, it is important to distinguish among companies.

For instance, the bulk of domestic manufacturing is not energy intensive. According to a 2009 paper prepared for the Pew Center on Global Climate Change by Joseph Aldy and William Pizer, only 10% of U.S. manufacturing required energy costs greater than 5% of the total value of shipments. These industries include iron and steel, primary aluminum, bulk cement, chemicals, paper, and glass.

And according to a report by IHS-CERA, which analyzed the impact of low natural gas on employment in various manufacturing sub-sectors, the impact on aluminum, steel, and cement is likely to be relatively muted.

However, the study suggested that the greatest potential impact is likely to felt in the U.S. petrochemical industry, where low NGL prices have provided a big boost. This is largely because ethylene and propylene companies' production costs are largely determined by the prices of ethane and propane, their two most important feedstocks.

Therefore, while cheap natural gas is sure to have at least a marginal positive impact on the manufacturing sector as a whole, its benefits are likely to be greater for companies whose energy usage accounts for a relatively large share of total costs.

Caterpillar, as the market share leader in an industry in which size matters, is another manufacturer that could stand to benefit from cheaper energy. Its quality products, extensive service network, and unparalleled brand strength combine to give it solid competitive advantages. Read all about Caterpillar's strengths and weaknesses in our brand new report. Just click here to access it now.